Q&A: Matt Richards, CMO at Datto, on MSPs navigating the virus

The managed services community is downgrading its growth expectations for this year, but is set to come through the Covid-19 pandemic

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A MicroScope contributor

Published: 15 May 2020 10:54

A couple of things are starting to become clear about the coronavirus. Firstly, it will be here for a while and secondly, that means it will have a negative impact on the economy.

That means it is going to potentially hurt the channel, but this is a sector containing businesses that understand the need for continual evolution and one with a track record of getting through tough times.

To try to get a sense of what the crisis might mean for the MSP community, MicroScope posed some questions to Matt Richards, CMO of Datto.

What is the financial impact going to be for MSPs?

As a result of the global health crisis, MSPs are adjusting their growth expectations for 2020, but they largely expect to weather the storm and even find new opportunities, according to our latest research.

Prior to the outbreak, MSPs globally were projecting to grow their revenue by about 20% a year, on average. Those projections have been adjusted downward by 11% for the remainder of 2020, meaning MSPs are still expecting to grow through the crisis, albeit at a much slower pace than originally planned.

When MSPs were asked how they expect the pandemic to impact 2020 revenue, nearly 40% said they expected to reduce their growth projection by between 10% and 20%. Some 23% said they expect to remain on plan or reduce their plan by less than 10%, and 11% are actually revising their growth projections upward, expecting revenue to increase during the crisis.

What factors are causing those adjustments in growth expectations?

MSPs that serve verticals directly impacted by mandated closures, such as hospitality, fitness and retail, have significantly revised their growth expectations.

MSPs serving businesses that remain open report that social distancing has made it more challenging to make on-site client visits and complete project work. However, these declines have been partially offset by the growing demand for remote access solutions and cloud migrations – which are creating new opportunities.

MSPs still expect growth, but selling looks very different than it did at the start of the year. For example, MSPs can’t meet face-to-face with prospective clients due to social distancing rules, and many businesses have frozen new spending. Also, some projects have been delayed due to changing priorities and social distancing, while others, such as new client PC roll-outs and cloud migrations, have accelerated.

How have MSPs been helping customers through the progression of the lockdown?

After setting up remote access and work-from-home solutions for their clients in the first few weeks of the pandemic, MSPs are beginning to face new challenges. However, they are also seeing new opportunities emerge, according to our latest research.

In the initial stage of the pandemic, MSPs played a critical role in providing SMEs with the IT infrastructure to keep their businesses running. With that phase largely complete, MSPs are looking ahead to how the next few months are likely to play out.

Cloud and security solutions were already in high demand, but MSPs see these solutions only accelerating during the pandemic. A remote workforce opens new security vulnerabilities for SMEs, and cloud migrations offer an opportunity to improve collaboration and business resiliency across a distributed workforce.

Longer term, MSPs see a continuation and acceleration of trends that were already in place before the pandemic: increasing cloud migrations and a focus on security. MSPs also expect SMEs to better appreciate their reliance on their IT provider and disaster recovery plans.

While concerned that business will ultimately slow down, MSPs also recognise an opportunity to improve their internal processes and systems. By completing this exercise, MSPs will be able to provide a stronger foundation for growth when normal business resumes. MSPs with a strong balance sheet and cashflow expect to acquire both new talent and new clients. This is primarily due to smaller or leveraged MSPs going out of business or missing SLAs.

Do MSPs have an advantage because they are serving a diversified and verticalised client base?

The financial picture of MSPs – driven by that of their clients – is another key area of concern. MSPs noted that business and financial instability among their clients are likely to have downstream effects for their own business, such as pressure on revenue, cashflow and receivables.

MSPs that had been highly verticalised in affected industries such as hospitality and retail are feeling the impact already, with clients asking for price reductions, reducing headcount or closing completely.

MSPs with a diversified client base may see these challenges in some clients, but expect to partially offset these losses with spending increases from other clients. MSPs note that government assistance, if applied in the right places, may offer some relief.

How are MSPs playing a critical role in keeping SMEs’ businesses running?

The shift to remote work has required new tools and exposed new security vulnerabilities. MSPs report having more after-hours calls, as clients are less likely to work standard business hours as they balance work and home responsibilities.

MSPs note that the crisis brings new opportunities to provide value to their clients and support them through the recovery. With the initial wave of work-from-home set-ups complete, MSPs see improvement of those remote access solutions, security and cloud migrations as the top opportunities through 2020. VoIP, business continuity, (Microsoft) Azure migrations, hardware sales and business resilience solutions are also expected to drive revenue.

Does Datto feel the changes are going to be permanent?

As a result of the pandemic, many changes have and will continue to take place on a regular basis. While some changes, such as cloud migration and work-from-home set-ups, will most likely be permanent for the time being, others will wane and give way to new opportunities as we enter a “new normal”.

For example, as employees begin to return to the workplace, office workstations that were sitting idle may require updates or patches. The opportunity for MSPs will be to help SMEs prepare the work environment to ensure employees have what they need to do their jobs effectively.

Covid-19 seems to have speeded up digital transformation plans. Is that also something MSPs have noticed?

With the increase in remote work, MSPs have been working hard to avoid cyber security risks or interruptions for their clients, which has resulted in speeding up some areas of digital transformation plans.

With companies having to extend the office to the home environment for their employees, this has required all hardware to have correct and up-to-date applications, secure connectivity, anti-virus and anti-malware in place for all software, as well as communications support such as soft phones.

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